Just a few years ago a borrower could have some fairly low credit scores and some derogatory items on their credit history and still be able to get a conventional or FHA mortgage approved for the purchase of a new home.
They may have been required to pay a higher interest rate but if the borrower was willing to do that then they could get approved and be able to move into that home of their dreams..
Today, it is much more difficult, if not impossible to get approved through a bank or mortgage company if your credit score is not at least 620. In addition, the mortgage lenders scrutinize a person’s credit history, income and debt much more than they ever did in the past.
So, what does one do if they have fallen on some hard times or gotten into some personal situations that have caused their credit scores to fall below the accepted minimum; yet they still want to buy a house?
Well first of all just because your credit scores are low doesn’t mean that they have to stay that way. It does not necessarily take a lot of effort to raise your credit scores. And it certainly doesn’t mean that you have to pay off all of your old collections.
But let’s look at how you could buy a house now in spite of your credit scores.
Since there is a glut of homes on the market today there are more owners who would be interested in allowing a “lease with option to buy” or even hold a mortgage for someone who wishes to purchase the house so they can get out of having to maintain an empty house.
Mainly, these owners want someone that they fill will make their payments on time and if it is a “lease option” contract will get their credit scores up to the point that they can eventually get approved for a traditional mortgage and actually purchase the house.
So, how do you convince these owners that you are the right person that they should trust even though your scores are low right now?
Well, as a real estate investor myself here is what would work with me. If someone were to show me they were on top of their situation and had a plan on how to make things better, I would certainly be willing to listen and probably do business with them.
If someone would show up with their credit report in hand and show me their scores and credit history and tell me exactly what they intended to do about the derogatory items on their credit report that would get my attention. I understand that it takes a little time to turn around ones credit rating.
I also understand though that someone has to have the desire and initiative to do what they have to do to improve their credit scores. If the prospect would show me their plan of action then I would be impressed enough to consider giving them a chance.
If you plan to pay off old collections, then show your income, your debt and your budget that will allow you to be able to make these payments.
If you need to establish new credit then show that you have gotten some new credit cards, gas cards or retail accounts and share how you plan to use these to build some new “good” credit to help improve your credit scores.
Then, of course, you will need to be prepared to pay some down payment money. This does not always necessarily have to be a lot, but don’t ask for a no money down situation.
As a mortgage loan consultant I know that it does not take a lot of effort to reverse some people’s bad credit scores. People have a tendency to think I am stuck with this situation forever. And, that is so not true. It just takes a little focus, initiative, time and knowing the right things to do. It does not even necessarily mean you have to pay off all your old debt.
You will be surprised how many owners will listen to you and give you a chance if you just take the initiative to show them that you have a plan to turn around your situation.
So, what do you do first? You can get a free credit score report once a year. There are a few other circumstances which will allow you to be able to get a free copy of your credit report. For your own benefit you really want to get a “tri merge credit report”. This is a combined credit report showing all of your credit history from the three credit bureaus (Experian, Equifax and TransUnion).
Go to
Check Credit Score site and learn how to get your free credit report, more about a tri merge credit report and what a good credit score so you will know where you stand.
If you don’t understand how to read a credit report or what to do to improve your credit scores then go to this site:
How To Improve Credit Score.
So get started now. Get your credit report, make your plan and go out and talk to some owners. Don’t be discouraged if you get a no from some owners. Owners that are real estate investors will understand the selling process better and be more willing to work with you than an owner that only sells a house once or twice in a lifetime.
Owners whose jobs have transferred them to another state will also be good prospects because they are more than likely making two house payments and would welcome a secure way to get out from under one of them.
Some states make it illegal for an owner to hold a mortgage on a property where they are obligated to a mortgage them selves. So, make sure that you are not talking someone into doing something that is illegal in your state.
Go Start here:
Check Credit Score
